Sweden: Improved pricing power for firms after three tough years

6/22/2017 - Report
ic_blogtagSwedenCountry Risk

Country Report

Moderating growth after strong years

During the past decade, Sweden’s economic growth was among the highest in Western Europe. Over the last three years, the Swedish economy consistently ranked first among Nordic countries, thanks to strong domestic demand. The mass arrival of migrants played a crucial role, as it prompted government spending, and further stimulated consumption and job creation.

Nonetheless, the Swedish economy is set to normalize, as consumer and public spending growths are decelerating. EH forecasts GDP growth to slow down to +2.2% in 2017 and +2.1% in 2018. This is well below the +3.2% average for 2014-16.  

Still, domestic demand will remain dynamic. Private consumption should expand by +1.8% in 2017 and +2.2% in 2018. Total investment growth is expected to reach a high of +6% in 2017 buoyed by a construction boom and the strong demand for housing. 

Exports will be the main driver for GDP growth in the next two years as global trade finally improves (+3.8% in volume after +2.0% in 2016, the lowest since 2009). Strong intra-EU trade is another source for optimism. Net exports should contribute positively to growth, while slower domestic demand could weigh on imports. 

In the medium-term, Brexit may affect growth as the UK is Sweden’s 4th largest export market. Yet the negative impact should remain modest

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